No.
Inflation is not really about prices, it is about the supply of money. We measure it with the Consumer Price Index (CPI) as an indirect method because directly measuring the supply of money is hard, and the effects of increasing the money supply on the economy are delayed from the action.
Since we have a "fiat currency", the money supply is controlled by the government. Remember the huge increases in the deficit during Covid? That's where all this inflation came from.
NOHOME said:Stockholders contribute nothing of value to a company and yet are entitled to the cream of whatever profits might show up.
Stockholders own the company, that's what it means. They are entitled to the profits for the same reason that a small business owner is entitled to the profits of his company.
In reply to alfadriver :
That's what I'm sensing as well.
The cost of doing business is increasing as everyone across the payscale is getting a raise, but a 5% increase for the guy at the bottom is a lot cheaper than the 5% raise for the guy already making $250k. The management and executives making good money don't really need a raise, but they have better authority to ask for one, which is probably why the average laborer still feels like they are struggling.
Job hopping is still the best way to increase your income, but the vast majority of people in the workforce can't afford that with housing costs the way they are. Especially those of with a relatively affordable 3% mortgage and average costs per square foot half of what the current market is.
Supply needs to exceed demand in housing, cars, and childcare, and until then, I think the average American worker will feel like the economy is hurting. Unfortunately, JIT production of nearly everything these days will keep that from happening - nobody wants to be stuck with too much stock.
Great time to buy a bicycle though!
Toyman! said:Take the top 5 higest paid of Fords leadership. Add up their total compensation, $79,000,000.00, and disburse it to all of Ford's employees.
Their total raise will be $0.22/hr.
Again, not enough to offset inflation or even be noticed.
Taking the top 1, or the top 5 employees is basically the same problem at a slightly different scale. It's not about the top X number of employees, especially if is a 1-digit number, it's about the top 5-9% of employees whose pay has increased with overall productivity vs. the bottom 90%+ whose pay has barely budged since the '70s.
NOHOME said:In reply to Toyman! :
It is not the upper management that is the dead-weight so much as it is the whole concept of "Stockholders" and stock-price engineering. Stockholders contribute nothing of value to a company and yet are entitled to the cream of whatever profits might show up.
"Stockholders" are the owners of a corporation, and as such assume all the risk associated with profitability, to the point of bankruptcy and total loss of principal. Seems like they ought to be entitled to something.
In reply to GameboyRMH :
Nothing in that article shows any company that increased their margins. There is lots of innuendo with little to no facts to go with it.
Do you seriously expect companies to reduce their margins when times are good? Do you also expect employees and customers to bail those companies out when they lose money? That would be a very Chinese way of doing business. I doubt it would fly in the USA.
One thing that was not mentioned was the price of oil. I'll try not to make this political. But in the last 3 years the price of oil has increased over 60%. We are now oil dependent. Prices of large commodities is determined by the seller, not the buyer. When we were oil independent we had some control over prices. Most of the items we purchase regularly is affected by the price of oil, from fertilizer to transportation. Every shipping contract I ever saw contained a fuel rider.
Toyman! said:In reply to NOHOME :
Without stockholders, the company has no access to cash. Without cash, there is no growth. Without growth, there is no company. Ask Sears or Kmart or Red Lobster how things look when their stock value crashes.
Ask Elon what happens when you are the darling of the market.
I love that Red Lobster was brought up, because it is looking like it will be the current prime example of a company that has been taken down by corporate greed.
https://www.restaurantbusinessonline.com/financing/red-lobsters-ceo-questioning-companys-relationship-its-owner
https://www.cnn.com/2024/05/20/business/what-went-wrong-at-red-lobster/index.html
I like how Bloomberg laid it out.
1. You are in the business of producing and selling shrimp.
2. You expand vertically by acquiring a chain of seafood restaurants.
3. The restaurants start to struggle and are heavily indebted, and you worry that your equity investment is losing value and possibly worthless.
4. How to cut your losses?
5. Well, you have two relationships to the restaurant chain: You own the equity, and you also supply the shrimp.
6. Not much you can do with the equity: There's a lot of debt, the creditors rank ahead of you, and they are unlikely to let you take any cash out as a dividend.
7. But, as the equity owner, you also control the board of directors and get to appoint the chief executive officer.
8. The CEO decides how much shrimp to buy.
9. What if he decided to buy a lot of shrimp?
10. Then you'd make money on the shrimp, and extract at least some value out of your equity investment.
There is presumably some tipping point.
In reply to 1988RedT2 :
I agree violently.
In reply to Mustang50 :
A very relevant point, see also the concept of "fossilflation." When the price of fossil fuels rises, and fossil fuels are widely used throughout the economy, the price of everything that involves fossil fuels as an input (again, almost everything) increases as well.
Few countries other than major petrostates like Saudi Arabia, at one point Venezuela etc. that can pump oil out of their land at absurdly low cost have ever been "oil independent" in modern history though. Most countries have production costs and capacities that leave them no ability to supply themselves at much below global prices, and as a result they have little power to affect global oil prices through their production.
BTW here's a good discussion on the greedflation issue with an economist who knows to ignore profits and focus on profit margins:
Mustang50 said:One thing that was not mentioned was the price of oil. I'll try not to make this political. But in the last 3 years the price of oil has increased over 60%. We are now oil dependent. Prices of large commodities is determined by the seller, not the buyer. When we were oil independent we had some control over prices. Most of the items we purchase regularly is affected by the price of oil, from fertilizer to transportation. Every shipping contract I ever saw contained a fuel rider.
Oil is up in the last 3 years because the bottom fell out in 2020. $80/barrel isn't out of line historically, regardless of which party is pulling political strings
During that time, you also had one of the largest oil producers in the world invade another nation and get blackballed.
As share prices drop, Target, Aldis, and Wal Mart are all dropping prices on thousands of items.
Many are asking "so why are you doing this now, instead of earlier?"
Considering that this thread has "proven" that corporate greed isnt to blame for these prices rising, I'm curious as to what is.
I'm thoroughly unimpressed by grocery prices, I can say that much for sure.
Regarding my experience with material costs:
A few years ago I had to implement a new protocol for estimating and contracting and had to begin setting expiry dates on estimates at 10 business days. Material volatility meant that otherwise I had to absorb a significant risk of being caught out when material prices increased; my steel supplier implemented a 24-hour effective quote policy.
Volatility has calmed down somewhat but has not entirely abated, so I've kept my 10-day estimate policy. Still, though, compared to 4 years ago prices have increased dramatically. A column that I used to be able to install for under $1,100 3 years ago is now over $1,900 (though I bundle credit card processing into the cost now, which adds 3% by itself).
On top of material, labor costs have increased. I pride myself on paying my crew well, but it's not necessarily their wages that drive up costs. My insurance costs have increased significantly despite never having a claim; this is not only bond costs but also payroll and worker's comp rates. It's just the nature of the thing.
GameboyRMH said:Toyman! said:Take the top 5 higest paid of Fords leadership. Add up their total compensation, $79,000,000.00, and disburse it to all of Ford's employees.
Their total raise will be $0.22/hr.
Again, not enough to offset inflation or even be noticed.
Taking the top 1, or the top 5 employees is basically the same problem at a slightly different scale. It's not about the top X number of employees, especially if is a 1-digit number, it's about the top 5-9% of employees whose pay has increased with overall productivity vs. the bottom 90%+ whose pay has barely budged since the '70s.
This is why we can't have a decent discussion with you about economics. You let feelings get in the way of facts. They are not the same.
Average hourly wage in 1979 for Ford that I can find was $6.80/hr. Adjusted for inflation, that would be approximately $29.37. Today's average hourly wage with Ford is $30.44/hour. It has kept up with inflation just fine.
I don't blame corporations for wanting to make money. That's their purpose. I do blame corporations (a little) for lopsided lobbying, cronyism, and corruption as it relates to regulators, audits, and the federal government. But let's put that aside for the moment...I also blame them (more than a little) for letting PE/vulture capitalists/MBA bros weasel into management and focusing solely on the next quarter, rather than a sustainable 3/5/10 year plan. Because as a shareholder myself, I want to make money 10+ years from now, not just tons this year and then bankrupcty next year.
For the real source of inflation, I MASSIVELY blame the federal reserve (which is independent of the government) for printing money and handing it out like drunken sailers the past several years at the expense of all of our futures. 0% interest rates, the PPP program, quantitative easing, and stimulus left, right, and center is what got us here.
Some relevant graphs:
It's chicken and the egg. Did the balance sheet have to go from <$1 trillion in 2008 to >$7trillion today? Of course not, inflation suggests MAYBE it should be $2-3trillion today. But pushing it that far almost guarantees monster inflation and greed. Because borrowing is essentially free, from both an interest and risk standpoint. When everyone gets a bailout, why worry about risk?
How do you fix it? We've already started, and I desperately hope we have the stones to follow through. Raise interest rates above inflation, (and berkeleying keep them above inflation), and more importantly, when hedge funds/PE/REITs/whoever your speculator of choice is goes bankrupt berkeleyING LET THEM. Don't bail them out, don't allow the executives to escape consequence free, berkeleyING LET THE SYSTEM WORK. Once risk gets accurately priced in again, markets should return to rationality. Should take 5-10 years and a lot of pain. We're 1-2 years in, let's keep it going. The prize at the end is worth it.
In reply to bobzilla :
Good for Ford employees (who are unionized BTW), what about everyone else though? My argument that pay has barely budged since the '70s are based on facts from national-level employment statistics and cost of living data, no feelings involved. Your fact about Ford worker pay was cherry-picked out of a tiny subset of that data.
GameboyRMH said:In reply to bobzilla :
Good for Ford employees (who are unionized BTW), what about everyone else though? My argument that pay has barely budged since the '70s are based on facts from national-level employment statistics and cost of living data, no feelings involved. Your fact about Ford worker pay was cherry-picked out of a tiny subset of that data.
Also, is that before or after last year's UAW contract that they fought so hard for? Cause I think starting wages jumped 70% with that contract.
GameboyRMH said:In reply to bobzilla :
Good for Ford employees (who are unionized BTW), what about everyone else though? My argument that pay has barely budged since the '70s are based on facts from national-level employment statistics and cost of living data, no feelings involved. Your fact about Ford worker pay was cherry-picked out of a tiny subset of that data.
In 2020 I was starting helpers at $10/hr. That's $18.10 in 2024 dollars.
In 2023 I started two helpers at $18.00/hr. Which happens to be almost exactly what inflation says it should be.
That's two data points for you.
Mr_Asa said:As share prices drop, Target, Aldis, and Wal Mart are all dropping prices on thousands of items.
Many are asking "so why are you doing this now, instead of earlier?"
Considering that this thread has "proven" that corporate greed isnt to blame for these prices rising, I'm curious as to what is.
They are doing it now because the high prices are having an effect on sales. That wasn't the case until now. Why would they cut prices when people were willing to pay them before?
To some extent, inflation is a self-correcting problem. If prices rise too high, people will stop buying stuff. Even with staples like groceries, folks will seek out cheaper alternatives. And when that happens, prices will come down, as we're starting to see from these major retailers.
Regarding profit vs margin vs greed:
One side uses profits to make their point about greed, while the other uses margins to make their counterpoint about greed. Neither really gives the correct context about greed because of something nobody really talks about. The more money you have, the less the next $1 is worth to you. This diminishing value of money also diminishes the risk associated with the effort to get more money. Which is why very small companies necessarily have a much higher minimum viable margin than very large corporations. Thus while the discussion of profit lacks context without comparing against revenue, so too the discussion of margin lacks context without further comparing it against revenue as well.
Think of it like people arguing about speed vs deceleration for crash safety, when the real problem is jerk. If profit is speed then margin is deceleration... In which case greed is actually (and appropriately) jerk.
GameboyRMH said:In reply to bobzilla :
Good for Ford employees (who are unionized BTW), what about everyone else though? My argument that pay has barely budged since the '70s are based on facts from national-level employment statistics and cost of living data, no feelings involved. Your fact about Ford worker pay was cherry-picked out of a tiny subset of that data.
You are the one brought up Ford, I followed through.
I started working in Walmart in 1994 full time at $6/hour. That would be $12.19 in today money. Guess what Walmart in the same town is now hiring at? $12.50 for full time.
In 1970, the average hourly wage was $3.47/hour($28.04/hr adjusted for inflation). Today it is $34.75/hour. I know I don't have a doctorate in mathematics but even a simpleton like me can deduce that $34 is greater than $28.
Mr_Asa said:GameboyRMH said:In reply to bobzilla :
Good for Ford employees (who are unionized BTW), what about everyone else though? My argument that pay has barely budged since the '70s are based on facts from national-level employment statistics and cost of living data, no feelings involved. Your fact about Ford worker pay was cherry-picked out of a tiny subset of that data.
Also, is that before or after last year's UAW contract that they fought so hard for? Cause I think starting wages jumped 70% with that contract.
starting wages did not jump 70%. I swear I don't know where you get this "information"
After all of these discussions, I'm surprised how many people still don't understand how business or money works, even on the most basic levels. Let's build a fictional business based on many of the ideas above.
It's all about the employees, so we'll pay them a high wage, above what the market dictates for their skill level. Our competitors will have a lower labor cost, but we expect that our higher paid employees will be that much more productive, despite evidence to support that.
We will pay our management less than our competitors, so that's an advantage. They don't do any real work anyway. We'll hire management that listens to the employees and does what they want.
We'll set our prices low, because that's fair to the consumer. We'll absorb as much cost increase as we can, and just lower our margin. Which margin? Gross, net, total dollars, percentage? It doesn't matter, it's all just margin, those terms are totally interchangeable. As long as we have some we are making money, right?
We want to grow our business, but we don't want any stockholders. They don't contribute anything. We'll just put every dime we can into the business, and just grow at whatever rate that allows for, if at all. The good thing is that all the risk will be ours alone, and if we fail, it just wipes us out. Sure we are risking everything for a low return on investment business, since we capped our margin, but we aren't in the business to make money. That would be greedy. We are in business to make the right amount of money, as determined by our employees and customers.
In reply to Mustang50 :
Definitely a good point that the cost of energy (including electricity of course) makes everything more expensive (as noted, not sure it's entirely out of line at this point). If only CA had any concept of that....
It should be noted though that energy independence is essentially irrelevant in a world market, unless a country nationalizes it's energy market (giving the government total control of where it is sold). Being a large producer can help though by being able to up production into the market when OPEC decides it wants more money and cuts production.
Of note is that the US is currently likely incapable of being truly energy independent (with oil at least) even if it could (politically) because I believe a large amount of the crude the US produces cannot be refined here (currently).
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